Work super schemes priority for Cullen

By AUDREY YOUNG

Employer-based superannuation schemes will be a key priority for Finance Minister Michael Cullen after tomorrow's Budget.

He has already foreshadowed a Budget move to allow employers to pay less tax on their superannuation contributions - addressing an anomaly whereby the rate of tax on employer contributions, 33c, can be higher than employees' if their marginal tax rate is 21c.

But Dr Cullen suggested yesterday that further work would be a priority, saying the ability of New Zealand to save and generate its own capital was of "continuous concern".

"I hope to see more significant moves over the coming few months as the periodic review group [the statutory advisory group on superannuation], the Investment Savings and Insurance Association and the Government work together, particularly in the area of employment-based superannuation, which I have identified as the top priority," he said in an interview with the Herald.

"I believe it is where we can leverage the biggest turnaround in our savings."

Dr Cullen said private savings had been "a long-term structural problem in the economy which has really seen no progress - if anything negative progress - for the last 10 years."

According to the Government actuary, 261,000 people belong to employer-sponsored superannuation schemes.

That amounts to just over 12 per cent of the workforce and is 21 per cent fewer than in 1990.

But in the same period the number of people in non-workplace superannuation schemes has almost doubled to 429,000.

The New Zealand Superannuation Fund - the so-called Cullen Fund - is expected to have an injection of about $1.8 billion in the new financial year, taking the total to about $3.9 billion.

For some time, Dr Cullen has been trying to dampen expectations that a healthy-sounding operating surplus, about $4 billion, should mean a spend-up.

Now he is trying to dampen expectations that he might be holding back for next year because he and Social Services Minister Steve Maharey plan to reform benefits, family support and welfare-to-work regimes.

"We've got to work hard to try and keep some spare there for what Steve and I have been talking about in terms of some form of targeted boost to assist low and middle-income families and around the issue of getting better incentives for people to move off benefits into employment," he said. "If there is an expectation out there that there is a big pot of money which I am holding to and that next year I might have a big pot of money to release ... there isn't a big pot of money at all."

Dr Cullen said accruals accounting - which had to take account of revaluation and depreciation of assets - meant the operating surpluses "look a lot bigger than the amount of money I have got spare".

He said the public should expect some proposals for tax simplification for small and medium enterprises and hinted at small, pragmatic incentives to attract investment "but no big-time incentives".

He confirmed that the Budget would set maximum tertiary fees, foreshadowed under last year's tertiary education reforms.